Economics & Investing: JWR's Predictions for 2023.

Today, in a special edition of this column are JWR‘s economic, finance, and market predictions for 2023 and beyond.

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Bottom line up front (BLUF), I believe that 2023 will be seen as a year of recession, layoffs, and stagflation. Consumer inflation will be rampant, but some assets will deflate, as the economy contracts. In the longer term, the recession starting in 2023 may develop into a general economic depression. Perhaps the era will someday be characterized as “The Depression of the late 2020s and early 2030s.” Now, for the details:

Precious Metals:

With inflation continuing at a rapid clip, I expect precious metals to outperform most other assets. If the expected recession is deep, then the monetary metals (silver and gold) will shine more than the industrial metals (platinum, palladium, rhodium, et cetera.)

A couple of wild cards are the ongoing war in Ukraine and the threatened war over the control of Taiwan. If either of those conflicts blows up into a regional or global war, then some of the more exotic and “strategic” metals that are crucial to high-tech weaponry (such as rhodium, ruthenium, and iridium) may go ballistic.

Global Economy:

The global economy is likely to slump in 2023 and 2024. Economies seem to be at a tipping point. I’m not the only economic commentator that is seeing this. Multinational corporations will have to be highly reactive or even predictive, in order to make a profit, in 2023. Mass layoffs will be the norm. Social unrest will follow. Wars will be useful distractions, to keep despots in their places of power.

U.S. Economy:

Here in the States, with a Democrat in the White House, the economy will stagnate, and inflation will continue. Stagflation will be the word of the day.

The deeply divided congress will enact very little new legislation. Just passing budgets will be a huge hurdle.

Mergers and acquisitions will proliferate, as big fish gobble up smaller, weaker fish.

There will be some massive layoffs, starting in the tech sector. As the economy grinds down into low gear, airlines, car manufacturers, banks, stock trading firms, and retailers will all announce major layoffs. Most folks will go into Hunker Down mode. A lot of 20-somethings will be moving back home to live with Mom and Dad. And whole families may be moving into Mom and Dad’s basement. The number of homeless people will surely increase, with a concomitant rise in street crime. Agitators from groups like BLM and Antifa will organize some huge protests, primarily in urban areas.

Finance and Government Debt:

With rising interest rates, the global credit market is drying up After more than a decade of artificially loose money, the whole world is definitely entering an era of tight money. It is difficult to make profitable investments in such times. The name of the game will be “wealth preservation”, rather than seeking profits.

There is a sovereign debt crisis brewing. Rising interest rates will make it increasingly difficult for governments to continue financing their debts. Presently, the central banks and the national banking cartels (like the Federal Reserve) are going through round after round of credit tightening. There will be several possible outcomes for most countries: Muddling through (with deep recessions and higher taxes), sovereign credit defaults, and currency collapses. Mass inflation or even currency repudiations are likely in some weak economies, such as those that characterize eastern Europe, Turkey, The Stans, much of Africa, and many Latin American countries.

Inflation:

The mass media is currently abuzz with talk that inflation will “abate in 2023”. That is utter nonsense. Unless the Federal Reserve is committed to going Full Volker, then the official inflation rate will linger around 8% and the unofficial (real world ) rate will be around 15%. By “Full Volker,” I mean raising the prime interest rate to match the real inflation rate. That is the only tool that can truly “whip inflation.” A 15% prime rate would destroy the economy and devastate the real estate market. How many people will be able to afford to buy a new car, when a 20%+ interest rate necessitates a $3,000 per-month car payment?

Industrial Commodities:

In recessions, industrial commodities suffer. If you want a barometer of the commodities markets in general, as well as a gauge of the overall economy, then watch the price of copper. Steel and aluminum will follow, with just a brief lag. 2023 will most likely be a bear year for industrial commodities.

Farm Commodities:

Often dependent on the weather as well as fuel and fertilizer prices, farm commodities can be quite volatile. I expect that 2023 and the remainder of the 2020s will be difficult for most farmers and ranchers. They will be whipsawed by high inflation, high feed prices, high fuel prices, and slashed farm subsidy budgets. In times of high feed prices, beef in the freezer beats beef on the hoof.

Energy Commodities:

With continuing inflation, the prices of oil, natural gas, and propane will likely remain high in 2023. Ditto for refined fuels like gasoline, Jet-A, and diesel. Even in a weak economy, people still need to move around. Freight traffic for transporting necessities and commuting to work always constitutes a baseline for fuel demand. Homes and businesses need to be heated. (Though thermostat settings will surely be uncomfortable, in hard times.) From a practical standpoint, preppers should endeavor to find the biggest fuel tanks that they can afford — and legally install, per local code. Then fill those tanks during seasonal dips in the market. Typically, those dips come in late winter and in spring. Work those supplies down during times with the highest prices. Usually, that is in the summer and fall.

Even with more solar and wind power coming online, grid power rates are tied to natural gas prices and regulations. So don’t expect your power bill to go down, in 2023 or in subsequent years. Bottom line: You need to develop your own power generation capability. These days, the most cost-effective way to do so is with PV panels — much more cost-effective and lower maintenance than micro-hydro or wind power. Storing electric power has always been an expensive part of the equation. I generally recommend nickel-iron batteries for fixed locations, and lithium-ion batteries for mobile systems. You may have noticed that Iron Edison is now a SurvivaBlog advertiser. But I was recommending nickel-iron batteries long before they decided to advertise with us.

Equities:

Generally, I expect stocks and bonds to suffer, as the recession sets in. There are very few stocks that are truly recession-proof. My advice: Sell your early stocks (preferably on the spikes) and buy in again only at the bottom. When will the bottom come? Sorry, but I lack a crystal ball. Just watch the markets closely, gauge the political winds, and be ready to pounce. Do not try to “ride it out”, as most of the market pundits suggest. Ponder this: People who left their money in the Dow stocks after the 1929 stock market crash didn’t break even again on average until 1955.

One exception: In the event of a regional war or a world war, then defense industries will surely be prosperous, and their shares will rise, correspondingly.

Forex:

The world’s fiat currencies have always been in a race to the bottom, whether credit is loose or tight. Inflation robs us all. The U.S. Dollar is presently strong, relative to most other currencies. But, as I’ve mentioned before, the world’s fiat currencies are like a colony of lepers. The Dollar just happens to be the leper that still has the most fingers. I could make other comparisons, perhaps using syphilitic whores as illustrations, but this blog has a family readership… All joking aside, be very careful about currency speculation. Yes, be ready to hedge as needed. But I much prefer practacal and barterable tangibles.

Private Cryptos:

You may recall that I’ve never been very enthusiastic about cryptos. I’ve long warned: “Keep your holdings small.”) The year 2022 proved that, with some ghastly bearish declines in private cryptocurrency values. They nearly all went down in price — some just more than others.

In 2023 and beyond, I expect to see some serious ups and downs in cryptos, but generally down. The biggest problems will be greater regulation and higher taxation. This is inevitable, because many governments plan to launch cryptos of their own, and they hate competition. (More about that, in the next section.)

An aside: There will be some bargains in used rack-mounted crypto mining processors. If you have the storage space, then you might be able to buy some pre-configured mining racks for pennies on the dollar. But be sure to buy only state-of-the-art processors. This might make sense if you live in a region with inexpensive hydroelectric power, or if you have your own power-production facility (such as micro-hydro or PV solar.)

Sovereign Cryptos/CBDCs:

2023 will likely be the first year with major Central Bank Digital Currency (CBDC) announcements. At first, the CBDCs will be used internally for government ledger-keeping, and transactions between governments. But after just a year or two, they will begin to supplant paper currencies, for the general public. The transformative power of consumer-level CBDCs cannot be overstated. These will be huge in their impact on the daily lives of citizens. Walk-up teller banking as we now know it will be obsolete. And, sadly, the CBDCs will also be hugely detrimental to personal privacy and freedom. In terms of privacy, consider that, unlike private cryptos with fully opaque transactions, CBDC transactions will be fully transparent. Governments love that kind of transparency because what they can see is what they can tax. The IRS and the DEA will be loving it. No more mattress money. No more “off the books” employees.

Even more alarmingly, CBDCs bring with them the ability for governments to implement social credit scores and/or carbon footprint scores. Count on it! This means purchase restrictions, travel restrictions, “sin taxes”, political favoritism, de facto coercive censorship, de facto firearms and ammunition restrictions, and even religious persecution. Pray for God’s hand of protection and a hiding place for your family.

CBDCs will be touted as the end of bank robbery and most street crime. The talking heads on television will proclaim: “All crime is retail.” But the unspoken corollary is: “All privacy is in cash.” Barter is an inferior second choice, to retain any sort of practical privacy.

Fine Art, Rarities, and Collectibles:

Although they have some utility as a hedge against inflation, I expect most fine art, rarities, and collectibles to decline in the nascent recession. In times of recession, collections tend to get liquidated. Inevitably, the more choice items move from weak hands to strong hands. I recommend holding what you have. And if have some cash, diversify by buying more collectibles at the bottom of the market. As the CBDCs start to roll out, I can foresee that the most compact, high-value collectibles such as jewelry and Swiss watches may jump in value, given their utility in private barter transactions. But diamonds and colored gemstones won’t become desirable unless hand-held detectors for authenticity are developed and those devices become commonplace.

Real Estate:

As the recession sets in and interest rates continue to climb, the top will come off the residential real estate market. I expect to see declines as deep as 50% in the most-overpriced markets, such as Atherton, Palo Alto, and Sunnyvale, California. Austin, Texas may see a 35% drop. Most major metropolitan regions will see a 25% drop. But some suburban and small-town markets may see as little as a 10% decline. As always: Sell high, and buy low.

Commercial real estate will suffer even worse, especially in urban centers. 2023 and 2024 will be years of “see-through” office buildings. Vacancies will be rampant, and the owners of office buildings will be ready to make some crazy-good deals for companies that are willing to move into their empty buildings. Some may even offer: “your first year is rent free“. Take note that if you own a company that would only have to move people, cubicles, and light machinery, then you should seriously consider relocation, to take advantage of such offers. And, if you are preparedness-minded, then that move should be away from urban cores. You should be moving out to the suburbs, or better yet, beyond, to the hinterboonies.

Chin Up!

As a survivalist or prepper, you will have an advantage in 2023 and the turbulent remainder of the 2020s. If you are a regular reader of SurvivalBlog then odds are that your debt level is low, you have a deep larder, and you’ve invested in some guns, ammo, and other practical tangibles that can be bartered. You have a big vegetable garden and some livestock. You also might have developed a second income stream or two, via home-based businesses. So you are well-positioned to pull through a recession or even a depression. Give yourself a pat on the back, and make plans to help others that lack your foresight, planning, and tangible preps.

Pray hard, team up, and train up. You will need a few trustworthy friends and neighbors in the difficult years to come. – JWR

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